Question

The slope of the _________________ is determined by the relative price of the two goods, which is calculated by taking the price of one good and dividing it by the price of the other good. Group of answer choices

Answer 1

Answer:

BUDGET LINE

Explanation:

Budget Line is graphical representation of product combinations that a consumer can buy, given product prices & income (all spent)

It is downward sloping because of inverse relationship between goods - one good's consumption has to be decreased to increase other good's consumption, given same prices & income.

Budget Line Equation : x.px + y.py = m

[x = quantity of good x, px = price of good x, y = y good quantity, py = good y price, m = money income].

Slope of Budget line is : Amount of a good sacrifised to attain the other good, given same prices & income. The sacrifise ratio gets derived from the price ratios of the two goods.

Budget Line Slope = ΔY / ΔX = PX / PY